Dave Ramsey: Get rid of the cards

Tuesday

Mar 14, 2017 at 12:52 PMMar 14, 2017 at 12:52 PM

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Dear Dave,We’re trying to get control of our finances, and my husband wants to close all our credit cards. I want to keep one and use the bill-pay option for monthly stuff like utilities, so we can keep earning rewards points. I look at my way as a method of just re-routing the money and paying it off each month. Am I wrong in looking at it like this?— Cheryl

Dear Cheryl,Yes, you are. Life never goes as planned. You can have all the well-reasoned and best-intentioned ideas you want, but sooner or later something will go wrong.

Why not use a debit card that has a rewards system attached? Lots of debit card programs offer the same kinds of rewards programs that credit card companies do, with one big exception — you don’t have to go into debt.

Studies have shown that the vast majority of people never redeem their credit card airline miles. Other studies show that people spend more when using credit cards as opposed to cash. That extra money you spend on things you don’t need is money you could have been saving and investing.

So, where’s the reward?—Dave

Collections and creditors questionDear Dave,We were very late on one of our credit card bills, and now it has been turned over to a collection agency. The collection company has offered us three or four different payment options. Does the original creditor accept the agreement, too, if we accept one of the collection agency’s options?— Anonymous

Dear Anonymous,In most situations of this type, the collection agency owns the debt outright or they’re directly representing the original creditor. It’s pretty much standard operating procedure when someone has defaulted on a loan.

My advice would be to accept the deal they’ve offered that makes the most sense for you and your current financial situation. It’ll ding your credit report, and show a settlement on the defaulted credit card, but that’s not the end of the world. There’s already a mark against you for it being turned over to collections.

If you want to keep things like this from happening in the future, you need to get control of your finances. Stop playing with credit cards.—Dave

— Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 12 million listeners each week on 575 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.